Morning Markets
December E-Mini S&P 500 futures (ESZ23) are up +0.23% at a 2-month high, and Dec Nasdaq 100 E-Mini futures (NQZ23) are up +0.42% at a 3-3/4 month high.
Stock index futures are moderately higher this morning, adding to Tuesday’s gains on signs that price pressures eased further after U.S. Oct producer prices rose less than expected. Stock index futures fell back from their best levels as bond yields rose modestly after U.S. Oct retail sales fell less than expected, and after the Nov Empire manufacturing survey general business conditions rose more than expected to a 7-month high.
U.S. Oct PPI final demand eased to +1.3% y/y from +2.2% y/y in Sep, weaker than expectations of +1.9% y/y. Also, Oct PPI ex-food and energy eased to +2.4% y/y, from +2.7% y/y in Sep, weaker than expectations of no change at +2.7% y/y and the smallest year-on-year increase in 2-3/4 years.
U.S. Oct retail sales fell -0.1% m/m, a smaller decline than expectations of -0.3% m/m. Also, Oct retail sales ex-autos unexpectedly rose +0.1% m/m, stronger than expectations of a -0.2% m/m decline.
The U.S. Nov Empire manufacturing survey general business conditions rose +13.7 to a 7-month high of 9.1, stronger than expectations of -3.0.
Stocks also have support on reduced chances of a U.S. government shutdown after the House Tuesday night approved a temporary government funding bill that will fund some parts of the government through Jan 19 and others through Feb 2. The legislation now goes to the Senate, where it is expected to pass.
Better-than-expected Chinese economic news today supports Chinese growth and global economic prospects after Chinese industrial output last month rose more than expected, and consumer spending improved after China’s Oct retail sales posted a larger-than-expected increase.
On the positive side for stocks, Target is up more than +13% in pre-market trading after reporting Q3 adjusted EPS well above the consensus. Also, Goodyear Tire & Rubber is up more than +8% after it said it is actively pursuing strategic alternatives for its chemical business and its off-the-road equipment tire business. In addition, Catalent is up more than +5% after reporting stronger-than-expected Q1 net revenue and forecasting 2024 net revenue above consensus.
On the negative side, Advance Auto Parts is down more than -5% after cutting its full-year EPS forecast. Also, TJX Cos is down more than -1% after forecasting Q4 comparable sales below consensus.
The markets are discounting a 0% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 0% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then discounting a +28% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and a 76% chance for that same -25 bp rate cut at the Apr 30-May 1, 2024 FOMC meeting.
U.S. and European government bond yields today are higher. The 10-year T-note yield moved up from a 1-1/2 month low of 4.424% and is up +5.7 bp at 4.504%. The 10-year German bund yield moved up from a 2-month low of 2.567% and is up +1.9 bp at 2.619%. The 10-year UK gilt yield recovered from a 5-1/2 month low of 4.121% and is up +3.4 bp at 4.186%.
Overseas stock markets are higher. The Euro Stoxx 50 is up +0.62%. China’s Shanghai Composite Index closed up +0.55%. Japan’s Nikkei Stock Index closed up +2.52%.
The Euro Stoxx 50 today rallied to a 2-month high and is moderately higher. An easing of global price pressures is supporting stocks after U.S. and UK Oct consumer prices rose less than expected. Strength in European technology stocks is leading the overall market higher, with Infineon Technologies AG up more than +6% after forecasting higher sales. On the negative side, French train maker Alstom SA plunged -17% after announcing a plan to cut jobs and sell assets. Also, Eurozone Sep industrial production fell more than expected, and the European Commission cut its Eurozone 2023 GDP forecast.
Eurozone Sep industrial production fell -1.1% m/m, weaker than expectations of -1.0% m/m.
The European Commission cut its Eurozone 2023 GDP forecast to 0.6% from a September forecast of 0.8%.
China’s Shanghai Composite today climbed to a 4-week high and closed moderately higher. Better-than-expected economic news improved market sentiment and boosted stocks after China Oct industrial production and Oct retail sales rose more than expected. Chinese stocks also found support, and the yuan rallied to a 3-month high against the dollar, after the PBOC boosted liquidity in the banking system and injected 1.45 trillion yuan ($200 billion) of cash through its medium-term lending facility, the most since 2016. In addition, Bloomberg reported that the Chinese government plans to provide at least 1 trillion yuan ($137 billion) of low-cost financing to aid the housing market.
China’s Oct industrial production rose +4.6% y/y, stronger than expectations of +4.5% y/y and the largest increase in 6 months.
China’s Oct retail sales rose +7.6% y/y, stronger than expectations of +7.0% y/y.
Japan’s Nikkei Stock Index today rallied to a 2-month high and closed sharply higher. Japanese stocks surged on carryover support from the sharp rally in U.S. stocks Tuesday, when bond yields plunged after U.S. consumer prices in October rose less than expected, bolstering speculation the Fed was finished raising interest rates. Japanese drug store operators jumped on possible M&A activity after Tsuruha surged more than +25% on a report it is exploring a sale that would value the company at $4 billion or more. On the negative side, Japan's Q3 GDP contracted more than expected, and the Q3 deflator rose at a record pace.
Japan Sep industrial production was revised upward by +0.3 to 0.5% m/m from the initially reported +0.2% m/m.
Japan's Q3 GDP fell -2.1% (q/q annualized), weaker than expectations of -0.4%. The Q3 deflator rose a record +5.1% y/y, stronger than expectations of +4.8% y/y.
Pre-Market U.S. Stock Movers
Target (TGT) rallied more than +13% in pre-market trading after reporting Q3 adjusted EPS of $2.10, well above the consensus of $1.47. Other big box retailers moved higher on the news, with Dollar Tree (DLTR) and Dollar General (DG) up more than +2%, and Walmart (WMT) and Best Buy (BBY) up more than +1%.
Catalent (CTLT) jumped more than +5% in pre-market trading after reporting Q1 net revenue of $982 million, stronger than the consensus of $936.2 million, and forecasting 2024 net revenue of $4.30 billion-$4.50 billion, the midpoint above the consensus of $4.36 billion.
Goodyear Tire & Rubber (GT) climbed more than +8% in pre-market trading after it said it’s actively pursuing strategic alternatives for its chemical business and its off-the-road equipment tire business.
VF Corp (VFC) rose more than +3% in pre-market trading after JPMorgan Chase upgraded the stock to neutral from underweight.
Arcturus Therapeutics (ARCT) rallied more than +15% in pre-market trading after Citigroup raised its price target on the stock to $40 from $45.
TJX Cos (TJX) slid more than -1% in pre-market trading after forecasting Q4 comparable sales climbing 3%-4%, the midpoint below the consensus of 3.9%.
Advance Auto Parts (AAP) tumbled more than -5% in pre-market trading after cutting its full-year EPS forecast to $1.40-$1.80 from a previous forecast of $4.50-$5.10, well below the consensus of $4.64.
Varex Imaging (VREX) sank more than -9% in pre-market trading after reporting Q4 revenue of $227.4 million, below the consensus of $233.7 million, and forecasting Q1 revenue of $180 million-$200 million, weaker than the consensus of $216 million.
Global-e Online (GLBE) plunged more than -18% in pre-market trading after reporting Q3 revenue of $133.6 million, weaker than the consensus of $141.3 million, and cutting its full-year revenue forecast to $563 million-$571 million from a previous forecast of $570 million-$596 million, below the consensus of $588 million.
Earnings Reports (11/15/2023)
Advance Auto Parts Inc (AAP), Catalent Inc (CTLT), Cisco Systems Inc (CSCO), Palo Alto Networks Inc (PANW), Target Corp (TGT), Tetra Tech Inc (TTEK), TJX Cos Inc/The (TJX).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
